EUR/USD teases weekly top below 1.1300, Eurozone inflation, US ADP Employment eyed

EUR/USD grinds higher around the weekly top near 1.1280, extending the bounce from a multi-day low heading into Wednesday’s European session.

The major currency pair’s latest gains could be linked to the market’s lack of conviction over the Fed’s hawkish stance, backed by mixed data and unclear Fedspeak. Adding to the upside momentum are the hawkish hopes from the European Central Bank (ECB) amid recently firmer Eurozone data.

That said, the bloc’s Unemployment Rate refreshed an all-time low with a 7.0% figure for December the previous day. On the same line was Germany’s upbeat Retail Sales, up from -0.6% forecast to 0.0% YoY during the stated month.

Talking about the US data, ISM Manufacturing PMI for January rose to 57.6 versus 57.5 expected, marking the 20^th straight expansion of the manufacturing activity.

It’s worth noting that Atlanta Fed President Raphael Bostic said on Tuesday that there is a "real danger" of inflation expectations drifting from the Fed's 2.0% target to 4% or higher. On the other hand, St Louis Fed President James Bullard said that he thinks it is an open question whether the Fed will have to become more restrictive (i.e. raise rates above the "neutral" 2.0%-2.5% zone). 

Elsewhere, the US Senate’s procedural voting on the China Competition Bill and chatters over Russia-Ukraine, as well as mixed concerns for global inflation, challenge markets ahead of the key weekly events.

Against this backdrop, the US 10-year Treasury yields fade the previous day’s rebound from a weekly low near 1.80% while upbeat prints of the Wall Street benchmarks seem to help the S&P 500 Futures to remain firm around 4,555 at the latest.

Looking forward, preliminary readings of the January Eurozone Consumer Price Index (CPI), expected 4.4% versus 5.0% prior, will be crucial for the ECB haws to keep backing Quantitative Tapering (QT). On the other hand, the early signal to Friday’s US Nonfarm Payrolls (NFP), namely the US ADP Employment Change for January, expected 207K versus 807K prior, will also be important to determine short-term USD/CAD moves ahead of Thursday’s ECB and Friday’s US jobs report.

Technical analysis

EUR/USD bulls cheer upside break of a three-week-old descending resistance line, now support around 1.1205, amid firmer MACD and RSI as they flirt with the 38.2% Fibonacci retracement (Fibo.) level of January 14-28 downside.

That said, the bulls currently aim for 50% Fibo. around 1.1300 as an immediate target during the further advances. However, a confluence of the 100-SMA and 200-SMA around 1.1315-20 will be a tough nut to crack for the pair bulls afterward.

Meanwhile, pullback moves remain elusive until staying beyond the resistance-turned-support and 23.6% Fibonacci retracement level near 1.1200.